Joining me right now is the co-founder and CEO of Enya.ai, that has partnered with OMG Network that scales and augments Ethereum, playing a critical part in the evolution. He is also the co-president at Stanford Angels & Entrepreneurs, and also a great friend. Alan Chiu, Welcome to the show.
Chiu: Thanks for having me, Angie. So happy to be here.
Lau: I’ve wanted to chat with you for a while. I heard about the Enya.ai and the OMG tie-up and this is really our first opportunity to dive a little deeper. Let’s explain the problem at the moment — scaling Ethereum. That’s something that Vitalik Buterin and other developers are aiming to solve with ETH 2.0. But how are already developers trying to solve that problem with layer 2? What is layer 2?
Chiu: That’s a great question to start us off. Ethereum has a rather limited capacity for computation and this is a known problem for several years and Vitalik and team have been working on potential solutions since then. ETH 2 is certainly on the horizon. And it’s going to be really helpful in solving this problem.
But the original vision for ETH 2 was quite ambitious. We’re trying to scale both computation and data at the same time. What happened more recently is Vitalik and many other Ethereum researchers have come up with an alternative solution rather than trying to do everything in ETH 2, scaling both computation and data. We are going to scale computation through an architecture called rollups, which is one form of implementing layer 2 — a blockchain that is secured by Ethereum. But we’re moving computation off the main chain, performing the computation, and then storing proofs back on the main chain to prove that the computations were performed correctly, and this actually makes ETH 2 scaling much easier to implement. For those who have been following the news Vitalik has actually moved up the estimate of rollup timeframe for ETH 2. So the latest approach of scaling Ethereum is through a combination of rollups on layer 2, and ETH 2 itself.
Lau: So, in fact, layer 2 even for the original smart contract blockchain, really an answer to the scaling solution. We know that computationally, proof-of-work is so much heavier and energy-laden and all of those things that we’ve talked about that actually impacts the speed and latency rates and the number of transactions. Layer 2, by removing some of these needed operational, computational processes to another layer for lack of a better description, actually frees up the pipelines a little bit. Is this what the concept is? Is this essentially what we’re seeing right now?
Chiu: Absolutely. By implementing computations on layer 2, moving them off the main chain, we are freeing up the precious blocks on the main chain so that in aggregate we can — as an ecosystem — handle a lot more transactions. So without even waiting for ETH 2 to become broadly available, we’ll immediately start seeing lower transaction fees and many more transactions happening between the combination of layer 2 solutions and the current implementation of Ethereum. And as we move forward to ETH 2, we will see an even greater increase in transaction rate, as well as more capacity for handling more applications and hopefully lowering gas fees accordingly.
Lau: And when you say we, you’re speaking from the collective, as in all of us. But I want to ask about you. Enya has recently launched the public test net of OMGX, which is a layer 2 Ethereum scaling solution for OMG network.
Tell us what work you’re doing at this tie-up with OMG and Enya. You’re working on a layer 2 Ethereum scaling alongside what ETH 2 is already working towards. Tell us a little bit about what you’re seeing is necessary in this space. Not only really from you, we’re seeing so many more layer 2 solutions that are trying to solve this exact problem.
Chiu: So let’s take a step back and look at the promise of Ethereum and what decentralization offers. That permission-less, censorship-resistant participation in decentralized applications that many of these that have taken off have to do with decentralized finance or participation in non-fungible tokens — that’s revolutionary because you don’t need anyone’s permission to participate and take advantage of these applications. However, because of their popularity, Ethereum has become cost-prohibitive for a lot of mainstream users. That prevents a lot of new users from even just trying out what it’s like to use these applications.
Now, this problem is well known, but there’s an even bigger danger to the health of this decentralization movement. And that is, the barrier to entry for developers to join the movement and build decentralized applications. Because as many attempts at scaling Ethereum have led to increasing complexity in code bases, and that means unless you are a real expert who’s been following these movements for a long time, it’s really hard for you to contribute to improving and maintaining these code bases. And on top of that, if we want more developers to be able to build decentralized applications, we need to enable them to take what they already know, what they’ve already learned in computer science classes, what the skills that they’ve picked up, building Web applications to use as many of those skills as possible in building decentralized applications.
That’s really the vision that we went into this space with, is how do we build a more inclusive ecosystem that could bring in more developers and more users at the same time.
Lau: So in other words, I am no developer. Sometimes I don’t even know how to reprogram my microwave. And yet, potentially, I could also participate in this new ecosystem in DeFi by easier user interface that you’re going to design on the front end — so front end, it’s going to be easier for me — but on the back end, the enter button might have all of the functionalities, the coding that allows me to execute, one thing or simple instructions. But on the back end, you might have already taken care of that? Is that the concept?
Chiu: Absolutely. So for you as a user to take advantage of these new decentralized applications, not only do we need to lower the cost for performing these transactions, which we want there to be as many of these applications as possible so that you as a user would have more choices. And competition leads to ever-better product quality. And that’s why we want to be able to bring in many more developers to help build out that decentralized application ecosystem.
That’s why we decided to work with OMG Network together and to build on an optimistic rollup architecture that has been created by the Optimism team. And we looked at many other options, too. We decided to build on Optimism because Optimism itself is just a modified version of Ethereum, which means going forward, it is so much easier to stay in sync and ensure forward compatibility with Ethereum, even though you’re running your smart contracts on our platform. And so that’s critical because that would make the job of developers so much easier to migrate smart contracts onto us.
But we’re not stopping here. We’re also researching and investing in capabilities so that you can perform more complex computations off-chain and then bring the results back to your smart contract, and that means the latest advances in machine learning and risk modeling and in many other fields of computer science, including what Enya brings to the table, which is secure privacy, preserving computation, you can now take advantage of all of these complex computations in the context of a smart contract, which you couldn’t do before.
Lau: There are so many layer 2 branches that are kind of growing out of Ethereum. OMG starting its test net, about to launch mainnet. If there’re so many layer 2 solutions, why are we still seeing congestions in the Ethereum network, as opposed to,other blockchains, when there are other options out there?
Chiu: First of all, Ethereum has really earned the trust of a lot of users and developers because of its scale, because it’s been battle-tested. And the fact that there are many other options actually is great, it pushes the whole decentralized movement forward. But Ethereum still has the largest mindshare amongst developers. By all developing on Ethereum, these different projects, DeFi projects, for example, can build on each other’s work. And that’s one of the key benefits of staying within the Ethereum ecosystem.
Now, why are we still seeing congestion? Yes, there are many layer 2 solutions that have been in the works, but most are still in the Testnet phase. But this summer is going to be an exciting period when many of these projects are finally coming to fruition and becoming mainnet ready. So over the next several months, there’ll be several layer 2 solutions that will be moving into mainnet and it will be an exciting time. We’ll see how that changes to gas fees that people have to pay to use these DeFi projects. We’ll see how that helps drive user growth and also create even more opportunities for DeFi developers.
Lau: I want to ask you about the privacy aspect that you’re really bringing on with Enya. Do you, I mean, increasingly, as all of us have experienced, either on an individual level or part of a group that was exposed to a bigger hack of a corporate, how important is privacy? And as a value proposition for either a token or a platform or even a layer 2 solution, in your view, where do you see the role of privacy?
Chiu: The role of privacy is essential to protecting individual users from being exploited by more sophisticated actors with ill intent on the network. After all, Ethereum is a public blockchain. Any transactions that you proposed and want to be included in the network are visible to anybody. As a result, frontrunning, for…